This essay focuses on the business case for maintaining strong financial controls. Its thesis is that the economic rationale for controls is too seldom articulated, and when it is, important elements are left out. This essay describes the key structural elements that make up a sound financial control system. It also discusses the role of values in sustaining a good “controls environment.” Finally, this essay provides a broad economic rationale that justifies the investments of effort and money that good controls require.
People who wish to see business operate more ethically should have a strong interest in good financial control. They also should want to understand how the costs of controls are more than compensated for by their contribution to business success. Only then will resisters be able to argue persuasively for sound control practices and to summon the resolve needed to resist ethical pressures.
Late in 1999, Exxon and Mobil merged to form ExxonMobil. Shortly thereafter, senior leaders from both companies were invited to a meeting in Dallas. There, Exxon chairman Lee Raymond joined with Lou Notto, his Mobil counterpart, to lay out key themes to guide the merged company.
Raymond, the merged firm’s CEO, spoke first. His remarks quickly delivered a message about priorities. His first point was expected. Both firms were great companies, ...